Covered federal contractors must provide their employees a minimum of 56 hours of paid sick leave per year, pursuant to a final rule issued by the U.S. Department of Labor (DOL) on September 30, 2016. The new paid sick leave regulations implement Executive Order 13706, issued by President Obama last year, and apply to federal contracts issued on or after January 1, 2017. The Executive Order and implementing regulations do not apply to all federal contracts. They do apply to contracts that are: (1) procurement contracts for construction covered by the Davis-Bacon Act; (2) contracts for services covered by the Service Contract Act; (3) contracts for concessions; and (4) contracts in connection with federal property or lands and related to offering services for federal employees, their dependents, or the general public. More information about the contracts that may trigger coverage can be found on the DOL website.

Under the new regulations, employees working on covered contracts are entitled to one hour of paid sick leave for every 30 hours worked, and must be permitted to accrue a minimum of 56 hours of paid sick leave per year. The leave can be used for an employee's own physical or mental illness or that of a family member, including preventative health care visits. It may also be used if an employee or their family member is the victim of domestic violence, sexual assault, or stalking; both to seek medical care and to pursue legal action or seek relocation services. Accrued sick leave will carry over from year to year, although employers are not obligated to pay out unused accrued leave when an employee leaves his or her job. Employees can use as little as an hour of leave at a time, and employers can only request medical certification of the need for leave when an employee uses three or more consecutive sick days.

A covered contractor's current Paid Time Off (PTO) policy can fulfill the sick leave requirements as long as it provides at least the same rights afforded under the Executive Order and implementing regulations. Among other things, this means the PTO policy must provide eligible employees with at least 56 hours of PTO that can be used for the same purposes described above. Covered contractors who want to use their PTO policy to fulfill their sick leave obligation will also need to ensure that the policy does not inadvertently run afoul of other parts of the applicable regulations, such as by prohibiting carryover or excluding certain groups of employees from paid leave eligibility.

The rule will be enforced by the Office of Federal Contract Compliance Programs (OFCCP), which has the authority to investigate potential violations. Violations include interfering with an employee's use of paid sick leave and discriminating or retaliating against an employee for exercising their right to the leave. Proven violations may result in suspension from federal contracting for up to three years and possible debarment. Federal contractors should assess whether the sick leave requirements apply to them and whether any existing PTO policies need to be altered to meet their new obligation.

In addition to these new federal contractor requirements, numerous states and localities have recently passed their own paid sick leave mandates. To comply with these new laws, employers should revise their existing PTO policies.